The limited housing supply in the nation, coupled with homeowners who purchased homes with low mortgage rates in recent years choosing to stay put, is a major contributor to the inventory problem. New home construction has also been on the decline for the past five months, exacerbating the issue. Despite the high prices, homes remain unaffordable for many, particularly first-time homebuyers.

 

While home prices remain elevated YoY, they're not as astronomical as they were in early 2022. The direction home prices take in 2023 will depend on mortgage rate trends. The tight inventory is keeping prices from declining substantially, but will it last? Only time will tell.

 

2023 Housing Market Forecast: Experts Remain Cautiously Optimistic Amid Economic Uncertainties

As we enter the second month of 2023, housing experts are keeping a close eye on the economy's many uncertainties, including high inflation, steep interest rates, geopolitical tensions, and recession fears. Despite these challenges, there are some positive signs of a housing market correction. For example, mortgage rates have slightly eased after reaching 20-year highs in late 2022.

 

Although home prices continue to rise year-over-year, they are starting to come down gradually, making affordable housing more accessible to some homebuyers. According to the National Association of Realtors, the median existing-home sales price increased by 2.3% to $366,900 in December 2022, compared to a year ago. This was the 130th consecutive month of year-over-year price increases, but the increase was slower than November. Additionally, month-over-month existing-home sales prices are down roughly 11% from their record high of $413,800 in June.

 

However, total existing-home sales dropped 1.5% from November to December 2022, marking the eleventh consecutive month of declining sales and a 34% decrease from the previous year. Despite these mixed signals, experts remain cautiously optimistic about the 2023 housing market.

 

Lawrence Yun, Chief Economist at NAR, believes that potential buyers may find discounted prices in roughly half of the country compared to last year. Meanwhile, Nadia Evangelou, Senior Economist and Director of Forecasting for NAR, expects increased sales activity as home shoppers trickle back this year, eventually leading to a full-on housing market resurgence in 2024.

 

The Housing Inventory Outlook for February 2023 suggests that low housing inventory will continue to be a challenge for the housing market, and inventory levels are not expected to return to historically normal levels in 2023. Low inventory has propped up demand and sustained higher home prices, but it has also led to lower sales. Industry experts predict that low inventory will continue to vex the housing market throughout 2023, and there is unlikely to be an inundation of homes soon. Builder sentiment has improved, but it is still low, and more consecutive upticks will be needed to see a significant rebound in new construction. While some experts predict a 5% drop in home prices nationally, other markets may see prices continue to increase. The likelihood of a housing market crash is low, as homeowners have positive equity in their homes, and mortgage products have become less risky. There has also been a missing symptom of a housing market crash, namely a jump in foreclosure activity.

 

As we enter into 2023, many are wondering what the housing market has in store for us. With the expiration of the Covid-19 foreclosure moratorium in September 2021, many have been concerned about the rise of foreclosures. However, the Year-End 2022 U.S. Foreclosure Market Report published by ATTOM Data shows that foreclosures remain below pre-pandemic levels, with a 34% decrease in 2022 compared to 2019.

 

Despite a 72% increase in foreclosure starts in December 2022 from the previous year, the report suggests that government and mortgage industry efforts during the pandemic, coupled with a strong economy, have helped prevent millions of unnecessary foreclosures.

 

One key difference between the current housing market and the 2008 housing crisis is that many homeowners today have had a large boost to their home values in recent years, meaning they still have equity in their homes and are not underwater. As a result, borrowers in foreclosure are leveraging the positive equity in their homes by refinancing their home or selling for a profit, a trend that is expected to continue in 2023.

 

But what does this mean for those looking to buy a home in 2023? It's important to remember that buying a home is a highly personal decision and requires careful consideration of your financial position. While trying to predict the future of the housing market may not be the best strategy, experts suggest that waiting for much lower prices may leave buyers disappointed.

 

Instead, it's important to focus on buying a home based on your budget and needs. Using a mortgage calculator to estimate your monthly housing costs based on your down payment and interest rate can be a helpful starting point. And if you find a home you love in an area you love that also fits your budget, then it may be the right choice for you.

 

However, it's important not to make too many sacrifices just to get a house, as this could lead to buyer's remorse and potentially force you to offload the house. As we enter into 2023, the housing market may bring some changes, but ultimately, the decision to buy a home should be based on careful consideration of your financial position and personal needs.

 

The housing market can be a daunting place for both buyers and sellers, especially in today’s market. With home prices remaining elevated and mortgage rates on the rise, it’s important to be prepared and informed when navigating the buying and selling process. Here are some tips to help you succeed in today’s housing market.

 

Tips for Buying in Today’s Housing Market

1. Start with a budget and stick with it. It’s easy to get swept up in the excitement of home shopping and overspend, but it’s important to stay within your budget to avoid getting in over your head financially.
2. Be prepared to act quickly. With limited inventory and high demand, homes are selling fast. Be ready to make an offer quickly if you find a home you love.
3. Don’t lowball offers. In a seller’s market, lowball offers are unlikely to be accepted. Work with your real estate agent to make a competitive offer that’s based on the current market value of the home.
4. Get pre-approved for a mortgage. Getting pre-approved for a mortgage can give you an advantage over other buyers and help you move quickly when you find a home you want to purchase.

 

Tips for Selling in Today’s Housing Market

1. Find a reputable listing agent. A good listing agent can help you price your home competitively, market it effectively, and field questions and offers from prospective buyers.
2. Be realistic about your home’s value. While it may be tempting to demand last year’s prices, it’s important to be realistic about the current market value of your home. Overpricing your home can lead to it sitting on the market for longer than necessary.
3. Prepare your home for sale. Even if your home is outdated, a clean and organized space can go a long way in helping potential buyers envision the home’s potential. Consider decluttering and making small repairs to make your home more attractive to buyers.
4. Be flexible with your selling strategy. With changing market conditions, it’s important to be flexible with your selling strategy. Be open to making changes, such as adjusting the price or marketing approach, if your home isn’t generating interest from buyers.

 

In today’s housing market, it’s important to be informed and prepared. By following these tips, both buyers and sellers can increase their chances of success in the competitive housing market.

 

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